Abu Dhabi tenants seek affordable locations as rents keep rising

Tenants in Abu Dhabi are rushing to relocate to more affordable locations as the cost of living in the capital continues to rise.

Rents for three-bedroom villas in Hydra Village rose by 32 per cent to Dh125,000 from Dh95,000 a year between January and September, as expatriate families hunted for cheaper deals.

That was the highest rise reported in the city.

Overall average rents in Hydra Village stood at an average of Dh117,500 – an increase of 25.9 per cent on the same period a year earlier. The development of 448 town houses outside the city at Shahama on the Abu Dhabi to Dubai highway is considered to be one of the more reasonably priced new-build locations in the capital.

This compares with an average increase over the period for the emirate as a whole of just 2.5 per cent, Cluttons said.

Cluttons found that rents in most of the established neighbourhoods of Abu Dhabi registered little increase over the past year.

Rents at Saadiyat Villas, one of Abu Dhabi’s most exclusive addresses, increased by just 2.5 per cent over the same period, rising to Dh585,000 in the third quarter of 2015 from Dh570,000 a year earlier. At Raha Beach too, already steep rents rose from an average of Dh179,167 in the third quarter of 2014 to Dh181,667 this year, an increase of 1.4 per cent.

And at Al Reef Downtown, once considered a cheaper option for families, average rents increased 0.6 per cent to Dh93,333 from Dh92,778.

“The severity of shortage of stock in the rental market has driven households out to peripheral locations in search of what they perceive to be better value for money,” said Faisal Durrani, the head of research at Cluttons.

Cluttons said that high rents in the capital and new mortgage caps were preventing many expatriates from buying homes in Abu Dhabi.

“An average expat household aspiring to purchase a home in Abu Dhabi has to contend with an average annual rent of Dh204,000 against an average household income of Dh199,000,” Mr Durrani added.

According to a report in September by the property broker CBRE, average monthly rents in Abu Dhabi are the second-most expensive in the world, exceeded only by those in London.

In October, the Abu Dhabi Urban Planning Council (UPC) director general Falah Al Ahbabi told The National that new affordable housing requirements could be introduced before the year-end.

The new policy will place targets for developers to achieve 20 per cent of affordable homes within new housing schemes Mr Al Ahbabi said.

However, the UPC has yet to identify what it classifies as “affordable housing” and who would be eligible to live in it. It has also yet to say whether any rent controls will be established.

Cluttons said that the current lack of affordable housing in Abu Dhabi is providing a major opportunity for developers.

“Abu Dhabi is clearly short of affordable neighbourhoods,” said Edward Carnegy, the head of Cluttons Abu Dhabi.

“This issue of affordability has been building for some time, initially following the introduction of the Federal Mortgage cap and doubling of property registration fees,” he added. “These had the desired effect of cooling the market, but now many people are forced to pay premium rents, limiting their ability to become owner-occupiers in the long term.

“This presents a major opportunity for developers to deliver housing that is ‘genuinely affordable’, while still of a high quality, with the potential to offer flexible access to home ownership through models such as rent-to-own.”